Freeport-McMoRan 2008 Annual Report Download - page 83

Notes to Consolidated Financial Statements
2008 Annual Report FREEPORT-McMoRan COPPER & GOLD INC. 81
NOTE 8. TRUST ASSETS
The components of trust assets follow:
December 31, 2008 2007
Employee and retiree benefit trusts
a
$ 117 $ 18
Global reclamation and remediation
b
114 544
Change of control 15 21
Rabbi trust 14 23
Total trust assets 260 606
Less current portion (included in other
current assets) (118) –
Long-term trust assets $ 142 $ 606
a. During 2008, the Voluntary Employees’ Beneficiary Association (VEBA) trusts were
amended to allow benefit payments for active as well as retired employees;
therefore, these trusts no longer qualify under applicable accounting rules as plan
assets under FCX’s postretirement medical and life insurance benefit plans.
b. Decrease results primarily from reimbursement of previously incurred costs for
reclamation and environmental activities. Includes $114 million in 2008 and $106
million in 2007 of legally restricted funds for AROs at the Chino, Tyrone and Cobre
mines. See Note 15 for further discussion.
NOTE 9. ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES
The following provides additional information regarding accounts
payable and accrued liabilities.
December 31, 2008 2007
Accounts payable $ 1,164 $ 1,195
Provisionally priced sales adjustments
a
698 59
Pension, postretirement, postemployment and other
employee benefits
b
156 108
Accrued interest
c
136 144
Salaries, wages and other compensation 129 278
Current deferred tax liability 78 171
Community development programs 74 118
Other 287 272
Total accounts payable and accrued liabilities $ 2,722 $ 2,345
a. Represents payables to customers as a result of adjusting embedded derivatives in
provisionally priced sales to market prices (see “Revenue Recognition” in Note 1 for
further discussion).
b. See Note 10 for long-term portion and Note 12 for further discussion.
c. Third-party interest paid by FCX was $741 million in 2008, $504 million in 2007 and
$80 million in 2006.
NOTE 10. OTHER LIABILITIES
The following provides additional information regarding other
liabilities.
December 31, 2008 2007
Pension, postretirement, postemployment
and other employment benefits and long-term
incentive compensation
a
$ 964 $ 644
Reserve for uncertain tax benefits 159 115
Accrued long-term tax liability 82 80
Atlantic Copper contractual obligation
to insurance company (see Note 12) 62 72
Community development programs 59 –
Insurance claim reserve 50 44
Other 144 151
Total other liabilities $ 1,520 $ 1,106
a. See Note 9 for short-term portion and Note 12 for further discussion.
NOTE 11. LONG-TERM DEBT
The components of long-term debt follow:
December 31, 2008 2007
Senior Credit Facility $ 150 $ –
Senior Notes:
8.375% Senior Notes due 2017 3,500 3,500
8.25% Senior Notes due 2015 1,500 1,500
Senior Floating Rate Notes due 2015 1,000 1,000
6
7
/8% Senior Notes due 2014 340 340
9½% Senior Notes due 2031 198 239
8¾% Senior Notes due 2011 115 118
6
1
/8% Senior Notes due 2034 115 115
7
1
/8% Debentures due 2027 115 115
7% Convertible Senior Notes due 2011 1 1
Other (including equipment capital leases and
short-term borrowings) 317 283
Total debt
7,351 7,211
Less current portion of long-term debt and
short-term borrowings
(67) (31)
Long-term debt $ 7,284 $ 7,180
Senior Credit Facility. In connection with financing FCX’s
acquisition of Phelps Dodge, FCX used proceeds from its
borrowings under its $11.5 billion senior credit facility. At the
close of the Phelps Dodge acquisition, the senior credit facility
consisted of a $2.5 billion senior term loan due March 2012, a
$7.5 billion Tranche B term loan due March 2014 and $1.5 billion
in revolving credit facilities due March 2012, with no amounts
drawn on the revolving credit facilities. The revolving credit
facilities are composed of (i) a $1.0 billion revolving credit facility
available to FCX and (ii) a $0.5 billion revolving credit facility
available to both FCX and PT Freeport Indonesia. FCX used
proceeds from equity offerings, operating cash flows and asset
sales to prepay the $10 billion of term loans by December 31, 2007.
FCX had borrowings of $150 million and $74 million of letters of
credit issued under the revolving credit facilities at December 31,
2008, resulting in availability of approximately $1.3 billion, of
which $926 million could be used for additional letters of credit.
Interest on the revolving credit facilities is based on the
London Interbank Offered Rate (LIBOR) plus 1.00 percent, subject
to an increase or decrease in the interest rate margin based on
the credit ratings assigned by Standard & Poor’s Rating Services
and Moody’s Investor Services. The interest rate on the revolving
credit facilities was 1.44 percent at December 31, 2008.
The senior credit facility also contains covenants, including
limitations on indebtedness, liens, asset sales, restricted
payments and transactions with affiliates. In addition, the senior
credit facility requires that FCX meet certain financial tests at
any time that borrowings are outstanding under the facility,
including a leverage ratio test (Total Debt to Consolidated
EBITDA, as those terms are defined in the facility, for the preceding
four quarters cannot exceed 5.0 to 1.0 on the last day of any fiscal
quarter) and a secured leverage ratio test (Total Secured Debt
to Consolidated EBITDA, as those terms are defined in the facility,